The economic efficiency of aid targeting

•We assess how efficiently foreign aid is targeted within countries to populations in need.•We use recently geocoded data on World Bank aid in 23 countries that crossed the lower-middle income threshold between 1995 and 2010 and experienced sharp aid reductions.•We measure locations’ need along many dimensions, including nighttime lights emissions, population density, conflict exposure, and child mortality.•We find little evidence that aid project siting is increasingly concentrated in worse-off areas as budgets shrink; the only exception appears to be a growing share of funding in more conflict-affected areas.•We further analyze the relationship of health aid to child mortality measures in six key countries, again finding little evidence of efficient responses to budget shocks.